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Value-Based Care News

Why Reviewing Pricing Trends is Key for Bundled Payment Models

What solutions should providers and payers follow when certain costs are out of their control within bundled payment models?

By Vera Gruessner

When payers begin to adopt bundled payment models, they may find some challenges standing in their way to truly succeed within these alternative payment solutions. For example, when attempting to contract through bundled payments, it may be difficult to decide on up-front costs and how to manage reimbursement through a value-based, quality metrics system. However, reviewing the history of pricing for particular services and treatments and setting up-front charges may be key in addressing this major challenge.

Value-Based Care Reimbursement

Some other potential obstacles standing in the way of bundled payment models include managing costs of patient care that are essentially outside the control of physicians. For instance, a doctor may not be able to change a patient’s lifestyle choices and help them pursue healthier behaviors if the patient is not interested in improving their overall physical health.

Also, the costs associated around treating patients with high-risk and complicated medical conditions may not be easily managed and controlled by doctors and hospitals as well. Older technological systems may also stand in the way of payers and providers improving their claims reimbursement processes in a value-based care manner.

However, in a previous interview, Michael Ciarametaro, the Director of Research at the National Pharmaceutical Council, and Robert W. Dubois, MD, PhD, the Chief Science Officer and Executive Vice President of the National Pharmaceutical Council, discussed ways payers and providers can support bundled payment models.

“We laid out three general principles,” Ciarametaro stated. “In terms of setting up the contracts, they need to be designed in a way that provides adequate reimbursement to achieve the optimal outcomes. There are four pieces under that. The first one is providing sufficient reimbursement for all the services and technologies required. The second is reimbursing for an appropriate clinical time-frame. If you’re too short, you tend to focus on practices instead of outcomes.”

READ MORE: The Role Risk Plays in Value-Based Care Reimbursement Models

When it comes to managing the costs of services and aspects of care that are outside the control of physicians, Ciarametaro suggests keeping those areas from being reimbursed through a bundled payment model and potentially sticking to fee-for-service in those arenas.

“The third is to recognize that clinical practice evolves pretty quickly, which means adjusting payment to adjust to those evidence-based practice changes whether it means doing things differently or whether to adopt new technologies. The fourth step is to focus on homogenous patient populations,” Ciarametaro continued. “The other things you can do are carve outs. If you have particular drugs or services that are expensive and highly variable, it may make sense to exclude those from the bundles.”

Rich Bajner, Managing Director of Navigant Healthcare, also shared his perspective in some of the obstacles payers face when adopting bundled payment models.

“Based on our experience facilitating payer-provider bundled payment contracts in the commercial market, the biggest challenges are analyzing historical claims that originate from multiple datasets (e.g., facility data; professional; pharma; etc.) to understand historical prices and set target prices [along with] modifying claim payment processes and systems to pay bundled payment claims, and, as such, most payers are not changing their claim payment process and are instead following CMS’ example to pay claims how they have historically and settle retrospectively,” Bajner told

Essentially, completely overhauling the prior system of fee-for-service and embracing value-based care models is a major obstacle to manage for providers and payers alike.

READ MORE: How Payers Could Meet Employer Needs in Bundled Payment Models

“Similarly, payers often have difficulty in developing the processes to share data with providers in a meaningful way that,” Bajner explained. “Beyond payer challenges, our experiences indicate the complexity of changing the delivery model to create savings is very challenging.”

The main solutions that Bajner suggests for payers to take is to create up-front costs and analyze the history and trends of pricing for particular healthcare services. His suggestions include payers and providers to “ensure setting the appropriate price up front, despite the complexity and data challenges” and to “review potential price for targeted provider partner and how their performance compares to broader market.”

Also, Bajner offers a viewpoint calling for changing quality payment targets and reaching these targets before making any significant changes to provider reimbursement. Essentially, putting less risk on providers at the beginning of bundled payment models may help clinicians transition to a greater emphasis on quality improvement without any major financial pressures.

“Initially focusing on retrospective performance review and settlements rather than investing significant dollars into changing claim adjudication systems until bundling achieves targeted results and ROI; and has the potential to scale across multiple providers and disease conditions,” he suggested. “Initially identifying specific improvement opportunities and quantifying savings based on such opportunities is a good way to creating buy in and create a path towards achieving specific goals.”

On the other hand, commercial payers looking to contract with managed care organizations are advised to invest in risk-based contracts. With MACRA legislation becoming a prominent topic among providers, public and private payers are expected to more closely align with the quality payment program and adopt alternative payment models.

READ MORE: How to Prevent Healthcare Underuse in Bundled Payment Models

“We currently are experiencing a growing number of private payers looking to the following strategies in contracting with providers: lowering unit reimbursement increase trends and shifting towards risk-based contracts on both MA and commercial lines of business,” Bajner noted.

“We anticipate that an increase in risk-based contracts will be designed to align with MACRA, based on the assumption that providers will be seeking APM eligible contracts from the commercial and MA markets,” he continued.  “As contracts shift to towards APM eligible, payers will need to develop capabilities to design and price contracts that include more significant shared risk / savings components.”

When transitioning to value-based care reimbursement, payers could also attempt to create ‘pilot conditions’ where providers could show how they would align and transition to alternative payment systems like bundled payment models.

“[Payers should] establish pilot conditions to evaluate how provider performance trends change, then adopt such learnings to future payment policies and models,” he concluded. “Payers could identify specific partners that are interested in working collaboratively with a payer to improve performance, evaluate different drivers of performance trends, create a value proposition on why working together is a win/win for providers, and set a compelling vision for transitioning to value based care reimbursements.”


Dig Deeper:

Time, Commitment Required for ACO, Value-Based Care Success

How to Overcome the Challenges of Bundled Payment Models


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